As VAT was the first tax to be broadly harmonised at EU level, it was logical to choose VAT as the basis for the EU second kind of own resource, just as customs duties on imports under the common external tariff constituted the first kind of own resource. Council Decision 70/243 of 21 April 1970, gave the EU financial autonomy and for the budget to be entirely financed from own resources. This was done by replacing Member States’ financial contributions by the EU own resources system, and with the introduction of a VAT-based resource.
VAT own resource for the period 2014-2020 accrued from the application of a uniform call rate (0.30% for all Member States except Germany, the Netherlands and Sweden that benefited from a reduced call rate of 0.15%) to the national VAT base, determined in accordance with rules common to all Member States. The uniform VAT assessment base was established following the provisions of the VAT Directive and Council Regulation 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from VAT.
The national VAT base to which the call rate was applied could not exceed 50% of the gross national income (GNI) of the Member State (“capping”). The capping of VAT bases was introduced with a view to share the burden of the VAT-based own resource more fairly among Member States. While the bases remained uncapped, this resource was considered to have the character of being overly regressive on some Member States.
The share of the VAT-based resource constituted 12.2 % of total revenue in 2017 (roughly equal to EUR 17 billion). This shows a significant decline since 1988, when the VAT-based resource accounted for 60% of receipts. The declining share of VAT-based revenues primarily reflects policy reforms introduced by the 1988 and 1994 Own Resources Decisions, i.e. the capping of VAT bases and the lowering, from 1995 onwards, of the rate of call. The reduction of this rate in 2002, in 2004 and in 2007 has further reduced the share of the VAT-based resource.
The Commission’s role
The authorising department for own resources is the Directorate-General for Budget, and the inspection of Member States’ VAT base statements falls under its responsibility.
The overall purpose of the inspection of the VAT-based own resource was to ensure, through analysis of documentation held in the office, through on-the-spot inspections in the present and future Member States, and through development of the appropriate methodology, that each Member State was in a position to contribute the correct amount of the VAT-based resource to the EU budget.